04 September 2014

Launched in 1979 by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, and initially covering 16 countries, the Global Competitiveness Report has evolved over more than three decades into one of the Forum’s greatest and most unique contributions.
It catalyses constructive policy dialogue among policy-makers, business leaders and other members of civil society.

Since 2005, the World Economic Forum has based its competitiveness analysis on the Global
Competitiveness Index (GCI)

India has slipped to the 71st position among 144 countries – the lowest among BRICS nations - in World Economic Forum's annual global competitiveness list.
"Continuing its downward trend and losing 11 places, India ranks 71st.

The Global Competitiveness Report 2014–2015 -

This year’s Report provides an overview of the competitiveness performance of 144 economies,
And thus continues to be the most comprehensive assessment of its kind globally.

Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy.

While all of the pillars described above will matter to a certain extent for all economies, it is clear that they will affect different economies in different ways: the best way for Cambodia to improve its competitiveness is not the same as the best way for France to do so. This is
Because Cambodia and France are in different stages of development: as countries move along the development path, wages tend to increase and, in order to sustain this higher income, labor productivity must improve.

The top of the rankings continues to be dominated by highly advanced Western economies and several Asian tigers. For the sixth consecutive year Switzerland leads the top 10, and again this year Singapore ranks as the second-most competitive economy in the world. Overall, the rankings at the top have remained rather stable, although it is worth noting the significant progress made by the United States, which climbs to 3rd place this year, and Japan, which rises three ranks to 6th position.Switzerland tops the Global Competitiveness Index again this year, keeping its 1st place for six years in a row.

Singapore ranks 2nd overall for the fourth consecutive year, owing to an outstanding and stable
Performance across all the dimensions of the GCI. Again this year, Singapore is the only economy to feature in the top 3 in seven out of the 12 pillars; it also appears in the top 10 of two other pillars. Singapore tops the goods market efficiency pillar and places 2nd in the labor market efficiency and financial market development pillars. Furthermore, the city-state boasts
One of the world’s best institutional frameworks (3rd), even though it loses the top spot to New Zealand in that category of the Index. Singapore possesses world-class infrastructure (2nd), with excellent roads, ports, and air transport facilities.

The competitiveness landscape in the Asia and the Pacific region remains one of stark contrasts. The region is home to three of the 10 most competitive economies in the world:
Singapore, Japan, and Hong Kong SAR.
A further three economies are featured in the top 20:
Taiwan (China), New Zealand, and Malaysia (20th), which is the best ranked of Emerging and Developing Asian nations.
At 28th, China stands some 40 places ahead of India

Taiwan (China) ranks 14th, dropping two places despite maintaining its score. The third of the Asian Tigers, behind Singapore and Hong Kong SAR, its performance has been very stable over the past six years. Notable strengths include its capacity to innovate (10th, down two), its highly efficient goods markets (11th), its world-class infrastructure (11th), and strong higher
Education (12th). In order to enhance its competitiveness, Taiwan will need to further strengthen its institutional framework (27th), whose quality is undermined by some
Inefficiency within the government (29th) and various forms of corruption (31st), and will also need to address some inefficiencies and rigidities in its labor market (32nd). As elsewhere in Asia, encouraging and facilitating the participation of women in the workforce (89th) would
Contribute to enhancing competitiveness.

India’s competitiveness crisis –

Despite its immense potential and promise, by many accounts India continues to suffer from poverty.

A third of its population still lives in extreme poverty—possibly the highest

Incidence outside sub-Saharan Africa—and many people still lack access to basic services and opportunities, such as sanitation, healthcare, and quality schooling.

Improving the standards of living of the Indian population will require the country to accelerate its growth.
Yet, since 2011, India has experienced a slowdown. In 2013, its economy grew by a modest 4.4 percent

Improving competitiveness in order to put growth on a more stable footing should therefore be a priority for the new government.

Dropping for the sixth consecutive edition, India ranks 71st (down 11) out of 144 economies in the Global Competitiveness Index (GCI) 2014-2015
It is the lowest ranked among the BRICS economies.

The rank differential with China (28th) has grown from 14 places in 2007 to 43 today; while India’s GDP per capita was higher than China’s in 1991, 1 today China is four times richer

This competitiveness divide helps to explain the different trajectories of these two economies.

India’s slide in the competitiveness rankings began in 2009, when its economy was still growing at 8.5 percent (it even grew by 10.3 percent in 2010).

Back then, however, India’s showing in the GCI was already casting doubt about the sustainability of this growth.

Since then, the country has been struggling to achieve growth of 5 percent.
The country has declined in most areas assessed by the GCI since 2007, most strikingly in institutions, business sophistication, financial market development, and goods market efficiency.

Overall, India does best in the more complex areas of the GCI: innovation (49th) and business sophistication (57th). In contrast, it obtains low marks in the more basic and more
Fundamental drivers of competitiveness.

For instance, India ranks 98th on the health and primary education pillar.

The health situation is indeed alarming: infant mortality and malnutrition incidence are among the highest in the world; only 36 percent of the population have access to improved sanitation; and life expectancy is Asia’s second shortest, after Myanmar.

On a more positive note, India is on track to achieve universal primary education, although the quality of primary education remains poor (88th) and it ranks a low 93rd in the higher education and training pillar of the GCI.

Transport and electricity infrastructure are in need of upgrading (87th).

In 2012, a working group appointed by the Planning Commission of India had recommended that a trillion US dollars—or almost 10 percent of India’s GDP be spent on infrastructure by 2017

Given the country’s strained public finances, addressing the infrastructure gap will require very strong participation on the part of private and foreign investors through public-private partnerships.

But for these types of investments to materialize, the institutional framework needs to improve. There are encouraging signs.

India has achieved spectacular progress in various measures of corruption and now ranks 65th.

Red tape seems to be less of an issue than it had been, and government efficiency is equally improving.

However, the overall business environment and market efficiency (95th, down 10 places) are undermined by protectionism, monopolies, and various distortionary measures, including subsidies and administrative barriers to entry and operation.

The World Bank estimated that it takes 12 procedures (130th) and almost a month to register a business (106th).

In addition, it calculated that taxes for a typical registered firm amount, on average, to 63 percent of its profits (130th).

Furthermore, the labor market is inefficient and rigid (112th).

These factors contribute to the high cost of integrating more businesses into the formal economy. Some estimates find that the informal sector accounts for half of India’s economic output and 90 percent of its employment

It is therefore urgent that the government create the right incentives for businesses to register and contribute their fair share to the provision of public services.

India achieves its lowest rank among the 12 pillars in technological readiness (121st).

Despite mobile telephony being almost ubiquitous, India is one of the world’s least digitally connected countries. Only 15 percent of Indians access the Internet on a regular basis. Broadband Internet,If available at all, remains the privilege of a very few.

India’s knack for frugal innovation should contribute to providing cheap solutions for bridging this digital divide.

The financial resources required for delivering basic services, including sanitation and healthcare, and for improving India’s physical and digital connectivity are considerable.

But India’s fiscal situation remains in disarray, as evidenced by the country’s 101st rank in the
Macroeconomic environment pillar of the GCI.

With the exception of 2007, the central government has consistently run deficits since 2000. Because of the high degree of Informality, its tax base is relatively narrow, representing less than 10 percent of GDP.

In addition, over the past several years India has experienced persistently high, in some years
Near double-digit, inflation, which reached 9.5 percent in 2013.

The Reserve Bank of India is torn between keeping interest rates low to stimulate the faltering economy and tightening monetary policy to stem inflation.

Improving competitiveness will yield India huge benefits. In particular, it will help rebalance the economy and move the country up the value chain so as to ensure more solid and
Stable growth; this in turn could result in more employment opportunities for the country’s rapidly growing population.

Despite the abundance of low-cost labor, India has a very narrow manufacturing base.

Manufacturing accounts for less than 15 percent of India’s GDP.5

Agriculture represents 18 Percent of output and employs 47 percent of the workforce.

Low productivity in the sector means very low wages and a life of mere subsistence for many.

The services sector accounts for just 28 percent of employment but for 56 percent of the economy. Most services jobs are low-skilled and poorly paid ones, though.
White collar jobs remain rare.

India needs to create jobs in the “missing middle” for the 610 million youths under 25—half of India’s population—who have recently entered or will soon enter the workforce.

In a parliamentary address in June 2014, President Mukherjee outlined the government’s economic agenda. It envisages building smart cities, establishing world-class industrial zones, and transforming the country into a manufacturing hub.

It remains to be seen whether the newAdministration will succeed in convincing the public opinion, mobilizing the resources, and passing the reforms necessary to achieve this vision.

Full Report consists of 565 pages PDF in depth regarding each pillar and each country